Government Pensions Protected in Bankruptcy

Municipal bankruptcy court has very limited powers.
Post-Standard Letter (published Dec 10, 2013).

December 10, 2013

To the Editor:

I think the title of your Dec 8 article, "Government Pensions are No Longer Untouchable", regarding the recent opinion by Detroit federal municipal bankruptcy judge Rhodes, is premature.

Federal laws may impair contracts, but a federal municipal bankruptcy judge serves only to oversee procedures and is not authorized to impair contracts or force liquidations. And since the Michigan Constitution explicitly prohibits the impairment of pension rights, Detroit may not do so. Nor can Detroit be forced to liquidate any assets to raise money to pay creditors, though it may if it chooses to. Detroit's Museum of Art is safe unless Detroit Emergency Manager Kevyn Orr chooses to serve the interests of creditors over city residents.

NYS law prohibits the impairment of state pension rights. So, if Syracuse were to enter into Chapter 9 Bankruptcy, municipal pensions would not be at risk.

I suspect Judge Rhodes' opinion on pensions is designed to fan the flames of attacking state pensions and to serve the interests of business creditors who would suffer fewer losses if pensions were added to the chopping block.

Carlo Moneti
Syracuse, NY